Power of Attorney
A Power of Attorney is a document where a person (the principal) appoints someone else (the agent) to act on his behalf. A Power of Attorney will allow the agent to make financial and medical decisions for the principal.
A Durable Power of Attorney is effective immediately upon signing. This means that immediately after the Durable Power of Attorney is signed, the agent can start making decisions and acting for the principal. Additionally, a Durable Power of Attorney survives the incapacity of the principal, which allows the family of the principal to avoid the interdiction process.
A Springing Durable Power of Attorney does not become effective until two (2) doctors or a doctor and the agent determine that the principal can no longer consistently make or communicate reasoned decisions for him/herself. A Springing Durable Power of Attorney is used when a person wishes to give someone else a Power of Attorney but does not want the Power of Attorney to be effective until a disability occurs.
Why do you need any type of Power of Attorney? One example involves an IRA or 401K. Most individuals own a qualified retirement plan, like an IRA or 401K. Under Federal Law, this is a separate asset of the individual who is the owner of the IRA. If a spouse, who owns an IRA, has a stroke and monies need to be withdrawn out of that IRA to pay for medical, living, or nursing home expenses, the other spouse has no legal right to withdraw such funds. While one spouse is typically the beneficiary of the IRA in the event the other spouse dies, the spouse is not a beneficiary in the event the other spouse becomes incapacitated. However, a properly executed Durable Power of Attorney would allow the spouse to withdraw funds from the other spouse’s IRA.